Insurance Basics: What Exactly is Liability Insurance?

WInsurance Basics: What Exactly is Liability Insurance?hat exactly is liability insurance? Well, it is any insurance policy that protects an individual or business from the risk that they may be sued and held legally liable for something such as malpractice, injury, or negligence. Continue reading to learn the basics of what this type of insurance entails.

General Liability

General liability insurance is coverage that can protect you from a variety of claims such as personal injury, property damage, and others that can arise.  Your general liability policy covers expenses related to out-of-court settlements, litigation, and court judgments. Who needs liability insurance? Drivers, business owners, homeowners, and other entities need it to protect themselves, their company, and assets. Liability Insurance has two components always included together: bodily injury and property damage.

Bodily Injury Liability Coverage

This insurance may help pay the costs of people injured or killed in an accident. Coverage may include hospital and medical bills, rehabilitation, long-term nursing care, funeral expenses, lost earnings, pain and suffering, and other expenses up to the limits you select. In some cases, legal defense costs may be covered if you are sued as a result of involvement in the accident.

Property Damage Liability Coverage

This insurance helps to pay for other people’s property, not yours. It may cover expenses to the repairs or replacement of damaged items such as vehicles, lamp posts, fences, or other property damaged during the covered accident.

Vehicle Liability Insurance

In most states, auto liability insurance coverage is a legal requirement for driving a car. In the case of a car accident, if the damage is a result of your actions then the insurance will cover you. Most states have a minimum requirement for the amount of liability insurance that drivers must have. However, if you can afford it, it is to your benefit to purchase a policy with higher limits that is above your state’s minimum requirement. This will provide extra protection if you are found at fault for an accident with claims that exceed your coverage’s limit—as you may be held financially responsible for the difference.

Business Liability Insurance

Package policies are created for businesses that face the same kind and degree of risk. Larger companies might purchase a commercial package policy or customize their policies to meet the special risks they face. For example, business owners would purchase a specialized policy called, Business Owners Policy (BOP) because it needs to cover specific risks that owners face day-to-day on top of general insurance coverage.

Homeowners Liability Insurance

This part of the homeowner’s insurance policy covers you against lawsuits for bodily injury or property damage that you, your family members, and pets cause to other people. It is recommended to not purchase just the minimum policy (around $100,000), but to buy enough liability insurance to protect your assets—especially if you own property, have investments and savings that are worth more than the liability limits in your policy. That type of coverage is known as an umbrella or excess liability policy (not covered under standard homeowners or auto insurance). Coverage may include both the costs of defending you in court and for any damages a court rules you must pay.

As you consider what kind of coverage to purchase, contact our agents about your options and what liability insurance limits make sense for you. At TJ Woods, you are working with agents that understand exactly what you need and are looking out for your best interest.